Andrew Carnegie may not be a household name but there’s a very good chance that his name is decorating at least one building in your city. At least, that’s the case for most major towns in the U.S. Although he’s far better known as a philanthropist now, Carnegie built a fortune from the ground up—a fortune that he gave away later in life. In this article, we explore the life and legacy of industrialist Andrew Carnegie.
Key Takeaways
- Andrew Carnegie was an industrialist and philanthropist who built a fortune from the ground up.
- Born in Scotland in 1835, Carnegie’s family moved to the U.S. when he was 12.
- He started work in the cotton industry but began making investments in railroads and related industries and buying up his competition.
- He had ties with other major industrialists and financiers, including Henry Frick and J.P. Morgan.
- Carnegie gave away his vast fortune to philanthropic issues.
Investopedia / Alex Dos Diaz
Early Life and Education
Andrew Carnegie was born in Dunfermline, Scotland, on Nov. 25, 1835. His parents were in the weaving and sewing trade. Never well off, the family saw their meager income dry up as the invention of power looms took over the industry. When Carnegie was 13, the family moved to the United States in search of better opportunities, which was something young Andrew had a knack for doing.
Carnegie worked at a cotton mill in Allegheny, Pennsylvania (now Pittsburgh), before moving on to a job as a telegraph messenger a year later. Carnegie made up for his lack of formal education with self-study by reading and teaching himself to translate telegraph signals by ear. This latter ability was the source of Carnegie’s next promotion to a telegraph operator.
Carnegie’s able mind and charm advanced him quickly up the ranks of the railroad until he found himself serving as the secretary for the Pennsylvania Railroad superintendent, Thomas A. Scott. Under Scott’s tutelage, he learned valuable lessons about management and investment. He became the assistant division superintendent by age 21 and three years became the division superintendent, out-ranking Scott.
Carnegie began investing in railroad companies and the industries that supported them and by 1863, he made thousands of dollars a year from dividends. In 1865, Carnegie founded the Keystone Bridge Company and became the first big step towards Carnegie Steel.
$309 billion
The estimated present-day value of Andrew Carnegie’s fortune, according to the Carnegie Corporation of New York. This net worth surpasses many modern-day billionaires, including Bill Gates, Sam Walton, and Warren Buffett.
Notable Accomplishments
Carnegie’s investments and partnerships gave him a controlling interest in several diverse businesses. He owned sleeping cars used in the railroad, a portion of Keystone, several iron works supplying Keystone, an oil company, and a steel-rolling mill. Carnegie thought iron would be the base for tying together his businesses, and he consolidated his ownership by vertical integration.
Carnegie bought his biggest competitor, Homestead Works, and a controlling interest in Henry Frick’s coke empire. Coke was essential to the steelmaking process, and Frick owned a lot of it. Although the two were very different men (Carnegie was charming and jovial whereas Frick was hard and taciturn), Carnegie saw that Frick had the ability to take over the daily operations of his considerable empire. In 1892, Carnegie combined his companies into one Carnegie Steel Co. and named Frick the chair.
Frick was staunchly anti-union, and the Homestead plant went on strike the very same year he became chair. Steel prices dropped and the cost-conscious Frick wanted to reduce wages to maintain a profit. The union disagreed and a lockout ensued. Carnegie was out of the country, and Frick was determined to break the strike rather than give in to the demands—something Carnegie often did. Frick brought in guards from the Pinkerton Detective Agency to protect non-union workers who were brought in to reopen the plant.
About a dozen people were killed in a fight between the strikers and guards. The militia was called in and the mill went back into operation with non-union workers, but the fight continued. An assassin, unrelated to the union, shot and stabbed Frick a week into the hostilities. He not only survived but returned to work a few days later. Seeing what they were up against, the union folded and accepted reduced wages to get back their jobs. The Homestead strike marred Carnegie’s image because many felt he had supported Frick throughout by silent consent.
Important
Carnegie’s mills had some of the most modern inventory and cost controls of that time. His management team included Charles M. Schwab, who later became famous as the head of Bethlehem Steel.
Wealth and Philanthropy
Wealth
On one of his trips to raise capital by selling bonds to European investors, Carnegie noticed the demand for steel was growing and might outpace that of iron. He changed his strategy and began to focus on steel holdings in 1873. Carnegie and his partners focused on building new mills with modern innovations that would out-produce the competition. It was around this time that Carnegie created two basic business rules to guide him:
- Profits would take care of themselves if costs were carefully monitored
- The presence of gifted managers was worth more than the actual mills they ran
His mills ran more efficiently than the competition, so he was in the best position to buy when the economy hit a six-year slump in 1873. He snapped up competing mills and companies on other levels of production. He renovated the older mills up to modern standards and was back to outproducing and outearning his remaining competitors when the economy recovered.
The economy would hit another rut by 1884 and around that time, Carnegie made a few acquisitions that would both cement his empire and harm his reputation. Contrarian investors find value in the worst market conditions.
In 1901, Carnegie was given the chance to make good on his word when he sold his company for $492 million to a group of investors headed by J.P. Morgan. Carnegie Steel became the centerpiece of U.S. Steel, a trust controlling 60% of the country’s steel production. Carnegie began his philanthropic phase with one of the world’s largest personal fortunes.
Philanthropy
Carnegie began to focus on writing and philanthropy after the Homestead strike. In 1889, he wrote an article called “The Gospel of Wealth” in which he stated that an industrialist’s life should have two phases: One where he accumulates as much wealth as he can, and another where he gives it all away to benefit society.
From 1901 until his death in 1919, Carnegie gave away the modern equivalent of billions of dollars. Perhaps remembering his trouble getting books as a youth, he funded over 2,500 public libraries in the U.S. and abroad—all bearing the Carnegie name. He also financed Carnegie Hall, Carnegie Mellon University, Carnegie Institution for Science, The Carnegie Hero Fund Commission, The Carnegie Foundation for the Advancement of Teaching, The Carnegie Foundation, and so on.
Legacy
Although perhaps a little too fond of his own name, Carnegie shared the stage with John D. Rockefeller as a new breed of industrialist, driven to build a fortune only to give it away. Even now, very few extremely wealthy people disperse their entire fortunes.
Carnegie was able to replace his image as one of the hard-nosed robber barons with that of a modern-day Santa Claus—an image reinforced by his white beard and twinkling eyes. His considerable business and investment expertise may be forgotten over time, but thanks to his philanthropy, his name will not be.
He is also commonly referred to as a pacifist and spent millions to help end World War I. This included supporting the establishment of the Peace Palace in The Hague in 1903 and giving $10 million to start the Carnegie Endowment for International Peace in 1910.
Personal Life
Andrew Carnegie lived as a bachelor for most of his life. That changed when he was in his early-50s. He married Louise Whitfield a year after his mother died. The two signed a prenuptial agreement that stated Carnegie would give away the vast majority of his fortune during his lifetime in exchange for an annual income of $20,000 that went to Louise. The couple had one child, Margaret, who was born in 1897. Andrew Carnegie died in August 1919. Margaret continued her father’s philanthropic legacy. She died in 1990.
What Was Andrew Carnegie Known for?
Andrew Carnegie was an industrialist who was known for making investments in and buying up companies in various industries, including steel, railroads, and coke, which is the material used in the steelmaking process. Carnegie was also a philanthropist who gave away vast amounts of his fortune to various causes, including peace missions. His name is associated with various buildings, foundations, and organizations like Carnegie Mellon University.
How Did Andrew Carnegie Make His Fortune?
Carnegie made his fortune using by making strategic investments and partnerships. This allowed him to take a controlling interest in various companies and allowed him to diversify his holdings. He also focused on expanding production (which included building new facilities) with modern innovative techniques to outperform his competitors.
What Industry Did Andrew Carnegie Control?
Andrew Carnegie amassed a great deal of wealth from the steel industry. He had his hands in several areas of the industry, including railroads, coke, sleeping cars, ironworks, and others.
The Bottom Line
Most people may not know much about Andrew Carnegie but his name is prominent in many major cities across the United States. The young man who came to America in the mid-1800s ended up becoming one of the biggest names in the country’s steel industry, making major investments and acquisitions. His vision allowed him to diversify his holdings in many parts of the industry, including steel production, rail cars, and railroads. Not only that, Carnegie left behind a legacy of giving, donating vast amounts of his fortune for different causes, including trying to end World War I.
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